Franchise Buyer's Checklist

While investigating a franchise opportunity, ensure these points do not conceal problems

• Directors' and key executives' business experience
• Company's track record
• Description of the franchise
• Initial investment required
• Other payments due to the franchisor
• Data on help in raising finance
• Restrictions on franchisee's personal participation
• Termination/renewal of agreement terms
• Number of existing franchisees and their success rates
• Franchisor's rights to select/approve sites
• Training and support guaranteed to the franchisee
• Financial information about pilot operation
• Financial data on the franchisor
• List of franchisor's banker and other professional advisers

• The Company's financial health and history
• How long it has been franchising
• Details of pilot operation results
• Current number of franchisees
• Permission to talk to random franchisees
• Main source of company earnings
• Value and appeal of product or service
• Long term viability of product/service
• Type and level of head office support
• Full details of the training provided
• Whether training is an extra cost
• Total cost of taking up the franchise
• Realistic working capital needed
• Permission for bank references and other referees
• Territorial practices and exclusivity terms
• Types and amounts of advertising
• Any need to buy products from the franchisor
• Target obligations
• Realistic profit and loss figures
• Management service fees or royalty payments
• Operating restrictions
• Launch assistance
• Sample contract

• Your rights to sell/transfer ownership of franchise
• Obligations to the franchisor, e.g. buying supplies / services
• Rights to renew or extend contract beyond original term
• Terms and conditions for terminating contract
• Description of exact training and support offered
• Precise price, commissions, rental fees involved
• Precise boundaries of the territory awarded to you
• Description of your heir's rights in the event of your death

• Promises huge profits with thin investments
• Says 'act now to get in on the ground floor'
• Fails to give statistics on sales and profits
• Promises 'easy sales'
• Fails to identify directors or principals
• Tries to 'trade you up' to a higher fee
• Says 'act now, it will cost more later'
• Promises profits by sub-franchising
• Has a name similar to a well known business
• Promises large income from 'work from home'
• Demands large 'front end' licence fee
• Has a very short term contract
• Provides no data on track record or financial strength
• Cannot give plans for future development
• Has vague territories
• Is ignorant of competition
• Has incomprehensible contract
• Is vague about support and training
• Has weak advertising
• Is vague about your financial obligations
• Has poor head office premises